Yet the barbarous relic only rose further in 2009, hitting fresh all-time
highs against all currencies except the Japanese Yen.

So will gold's oddly long-lived and still dismissed "bubble" finally pop
in 2010?

Economists forced by its performance to consider gold are quick to note that
it pays you no income. Modern metrics thus cast gold as invaluable, too often
confused for worthlessness. Nouriel
Roubini claims gold has "no intrinsic value"; in the absence of rapid inflation,
he says, this must be a bubble.

Little-used by industry however (just 14% of average annual demand over the
last 5 years), gold's economic value comes rather in its social use - a store
of wealth when everything else fails. And outside precious metals and commodity
trackers, the Noughties couldn't even live up to their name.

The worst decade for equities since the 1930s (if not the
1820s; depends who you ask), Y2K to 2009 also gave the developed world
its first synchronized real estate slump. Yes, bond-buyers have now enjoyed
a three-decade run, but to perpetuate that bull market in the Noughties,
zero per cent interest rates - plus a flood of central-bank money creation
in Japan, the US and Europe - were just the final insult for retirees and
savers.

Cash deposits have long paid next-to-nothing after inflation, with tax-free
UK cash ISA accounts returning precisely zip on average since early 2007. Six-month
CDs in the US averaged 0.8% real returns per year during the last decade, twice
what they paid during the 1970s but down from 2.4% in the '90s and 4.4% in
the '80s.

For private capital seeking defense, let alone a return, such low-to-subzero
real rates of interest negate the opportunity cost of holding gold - that rare,
indestructible, simple and crucially non-defaulting lump of pre-modern money. Low
real rates are also the common denominator between the last decade's four-fold
gains in gold and the inflationary '70s. Which makes a surge in the returns-paid-to-cash
gold's likely killer again in due course.

Whatever nominal hikes (or the mere threat) do to gold
prices short-term, however, strong returns to bank savers remain a long
way off, as Ben Bernanke announced in his "Blame regulation, not low rates" speech
at the turn of this year. Professional Fed watchers are split as to whether
the overnight rates will rise before 2011 or 2012, but consumers' natural
reaction to the downturn - paying down debt and building new savings - is
being overtly rebuked either way.

Working off the "Taylor Rule" that judges job losses against a loss of purchasing
power, an internal Fed paper in spring
2009 put the "ideal" real rate of interest at minus five per cent. Now
facing six million US job losses since the start of 2008, economists led by Paul
Krugman and Brad DeLong are calling for the Fed to set an explicit inflation
target, so it can explicitly higher inflation. Absent a genuine "earnings
surprise" for Japanese, European and North American equities meantime (driven
perhaps by over-spent, over-taxed and under-employed consumers...?) stocks
are already valued above their historic average in terms of price/earnings.
Bear-market bottom this ain't.

Outside the developed (and increasingly decrepit) West...with its discrete pawnshops-by-post and
half-emptied central bank vaults...the fastest-emerging economies are fast
accumulating gold, both as private and public hoards. The Reserve Bank of India
made headlines (and a 17% rise in gold prices) with its decision to buy 200
tonnes of gold from the IMF this November. The People's Bank of China quietly
built its reserves all last decade, and Russia overtook the Netherlands in
December as the world's sixth-largest hoarder. The real story going into 2010,
however, remains China's
private demand, with households buying more than four times as much gold
as the PBoC in the last five years - a massive 1,775 tonnes - equal to more
than 2% of China's famously huge personal savings from income.

What about valuation? All told in 2009, the world's total stock of mined gold
rose in value to almost 11% of global GDP. It last peaked in 1980 equal to
18%, but that was when real interest rates were high, Western finance and labor
markets were being deregulated, and East Asia's demand for gold - an end-in-itself,
rather than an investment vehicle; the aim of accumulation, not the means -
was suppressed.

Ten years into the current bull market, technical analysis might expect distribution
from strong hands to weak. Yet while cash-strapped households sell their jewelry
as scrap, hedge funds led by Paul
Tudor Jones and John Paulson are only now building their positions. And
the bull market in bonds, meantime - gold's nemesis last time around, with
10-year yields offered in early 1982 above 15% - has now run for 28 years.
If any trend is hitting exhaustion, financing government spending at ever-lower
rates of interest must be it.

Bond prices have already dropped back as yields have erased (and more) the
quantitative easing plunge of March 2009. Now governments everywhere are preparing
for an historic refinancing drive, costing
the UK alone more than £215bn ($340bn) by the start of 2015 just
to repay its maturing debts - well over 3% of GDP before any spending or "stimulus" starts.
To keep a lid on bond yields with guaranteed buyers, fresh quantitative
easing will no doubt arrive. But debt monetization would only bring forward
the crisis, and a major sovereign downgrade, if not default, looks set to make
headlines sooner or later.

How much further can governments abuse faith in their debts and currency?
At a guess, we'll find out sometime before the end of 2019. But holding gold
today - or even daring to buy
gold's recent 12% drop - is a long way from saying this time is different.
It is a bet instead on things all too much the same, starting with policy-makers
caught between just the same "inflate or die" panic that kicked off when the
Tech Stock bubble burst a decade ago.

Formerly City correspondent for The Daily Reckoning in London and head of
editorial at the UK's leading financial advisory for private investors, Adrian
Ash is the head of research at BullionVault,
where you can buy gold
today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the
secure, low-cost gold and silver exchange for private investors. It enables
you to buy and sell professional-grade bullion at live prices online, storing
your physical property in market-accredited, non-bank vaults in London, New
York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people
from 97 countries used BullionVault,
owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical
silver (US$129m) as their outright property. There is no minimum investment
and users can deal as little as one gram at a time. Each user's unique holding
is proven, each day, by the public reconciliation of client property with formal
bullion-market bar lists.

BullionVault is a
full member of professional trade body the London Bullion Market Association
(LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious
Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development
body the World Gold Council (www.gold.org)
joined with the internet and technology fund Augmentum Capital, which is backed
by the London listed Rothschild Investment Trust (RIT Capital Partners), in
making an $18.8 million (£12.5m) investment in the business.

Please Note: This article is to inform your thinking, not lead it.
Only you can decide the best place for your money, and any decision you make
will put your money at risk. Information or data included here may have already
been overtaken by events - and must be verified elsewhere - should you choose
to act on it.